perhaps you should ask yourself first, what is the use of talking about politics, when you have no power to control the political environment?

even if you knew what to do, you can do nothing.

put your heads back down on the grass, and let the real people in parliament get on with buggering up the nation.

Demos ,this is about economics,the most fundamental thing that affects all our lives.If the masses dare not question or try to understand,then we are doomed to repeat your fatalistic scenarios.

This interest rate policy has always been a totally inefficient, & complete misdirected. It has very little effect on those who drive inflation, those with a large discretionary spending capacity. What it does is attack only those with very little discretionary spending capacity, who have no chance of driving inflation.

It attacks small business, farmers, & home buyers, in the lower end of the market. These are the people who are the backbone of the country. Those working hard & trying to do their best for their families.

It does not have much effect on large business, the wealthy, or the young, & not so young, singles. All of these have the capacity to spend large amounts of money, in inflation driving areas.

It has no effect on the very large section who are subsidised by the tax payer, & before all you bleeding hearts start screaming, I am a pensioner, but why should it be only my kids that are effected.

It is because of its misdirection that it always takes so long to have the economists desired effect. An immense amount of damage has to be done to lower middle australia, before this ridicules policy starts to effect those who have to be effected, for it to succeed. Are our leaders really so stupid that they can't see this.

Back in the 50s, & 60s we had a much more benign way of controlling inflation. It was called a credit squeeze. A reduction in liquidity made it hard to borrow money, & reduced the inflationary pressure. It had no effect on our home lone rate. It stayed at its 4.25%, yes thats right, 4.25%, & that interest was tax deductible.

And whats so wrong with a bit of inflation? Many who are now very comfortable, paid off their 1960 loan with 1970 inflated earnings. [Adjust for your decades]. It made paying the house off, a much less painful process. Its only the lenders who gain from low inflation, particularly with a floating exchange rate.

So, yes, its about time they started pulling some different levers.

*Back in the 50s, & 60s we had a much more benign way of controlling inflation.
And whats so wrong with a bit of inflation?*

Hasbeen, a couple of snips from your post. What you had was the
Nanny State, it didn't work and still causes us some problems today.
You forget the law of unintended consequences. When Govts try
to put out one fire, they usually accidentaly light a few others,
solving nothing, just creating even more problems.

A bit of inflation means that it goes up on a spiral, as it does,
so do interest rates. Thats exactly why we landed up with 18%
and it was not pretty.

Fact is that Australians are bad savers, for good reasons, our
tax policy. Invest 100k in the bank, the Govt takes half in
marginal rate tax, inflation takes the other half. So people
don't, they prefer to borrow and buy houses or whatever.

The net result is that our current account deficit is huge, unlike
our trading account, which is not so bad.

The Nanny State can't solve all that, that's exactly why Keating
changed to market economics, but that means that people have
to become responsible for their actions and feel pain if they
don't.

I know people who earn 100k and still can't manage their money
and are in debt, others cope quite well on a pension.

If people blow it all at the pokies, if they pay far too much
for their house, if they run up huge credit card debts and pay
a fortune in interest, they need to learn to change their ways,
the Nanny State will not solve it for them.

It is nonsense to suggest that only the poor get it wrong and are
suffering. I saw an article the other day on the Eureka report,
which showed how many houses in Palm Beach are for sale. All due
to relatively wealthy people borrowing too much, losing it on
margin trades on the stock market and now paying the price.

Fools and their money are soon parted, be they rich or poor.

Yabby, the difference is that the poor do not have at their disposal the income to be able to adapt to abrupt changes in interest rates. Those selling off their house in Palm Beach because of foolish decisions wasted the advantages and benefits that their higher incomes afforded them.

The poor and the working poor are not frugal by choice, it is a condition imposed and as such the impact of rising interest rates is much greater ie. there is not much room to move on the domestic budget.

I always wonder who is doing all this spending - it certainly cannot be with real money given the large level of personal debt in this country.

Would it be too cynical to suggest there might be other interests or motives at play in over-emphasising the importance of increasing interest rates to control inflation in monetary policy?

Yabby, Who was talking about the bl@@dy poor. I was talking about the lower middle class, who aspire to home ownership, & something put by for their kids.
If you had read what I said, you would see that with even modest homes, there is not much left for these people to drive up inflation.

If they or anyone else, run up debt they deserve to pay the price, but they don't deserve to be the ONLY ONES paying the price for bad government, which is how this policy, in facy, actually works.

Yes Pelican, it is the lenders who have most to gain with this policy. Their repayments are made with ful value money, not money devalued by inflation.

Just one other thing Yabby, if the 60s were a nanny state, just whatdo you call today. We had very few "SERVICES" back then, thank god. We paid our own way, but were protected from rip off banks.

Of course, we only had to drag one tenth of a public servant around behind us, not the half of one we have today.